Eurostat delays decision on agreement between Portugal and Mozambique on Cahora Bassa

26 September 2006

Lisbon, Portugal, 26 Sept – The European Union’s statistics body, Eurostat, has requested more information from the Portuguese government on the changes to the shareholder structure of the Cahora Bassa Hydroelectric Dam, Portuguese daily Diário de Notícias reported.

In Tuesday’s edition the paper said that a team from Eurostat visiting Lisbon had requested more detailed information about the operation, which includes passing over a majority stake owned by the Portuguese state in Cahora Bassa to the Mozambican state, from the National Statistics Institute, the Ministry of Finance and the Bank of Portugal

The issue is how to account for the operation as well as how to assess the impact that it will have on Portuguese public accounts and decide whether it is compatible with Portugal’s commitments for cleaning up its finances.

The agreement between the Portuguese and Mozambican states on the dam dates back to November 2, 2005. Via that agreement Portugal would change its shareholding in the dam from 82 percent to 15 percent and Mozambique would control the remaining 85 percent share of the infrastructure. Mozambique would have to hand over US$950 million to the Portuguese state to seal the deal.

On the face of it Cahora Bassa would seem to be a good deal for Portugal as it would receive US$950 million from the Mozambican state. But Portugal has insisted that its should receive US$2.5 billion for Cahora Bassa, which would mean that November’s agreement would represent a 62 percent pardon of the debt that would be accounted as a capital transfer, which would, in theory, increase the budget deficit.

Despite Maputo’s insistence that the process be speeded up, the Portuguese government wants to be certain that the operation will not increase its deficit and Eurostat appears to be in no hurry to make a decision.

The Cahora Bassa dam, which is one of Africa’s largest hydroelectric projects, was built on the Zambezi River and created a reservoir covering some 230 kilometers, in the West of Mozambique.

Construction of the dam began in 1969, and it went into operation in 1978. (macauhub)